According To National Sample Survey Organization

According to National Sample Survey Organization (NSSO), approx 400 million people in India are
employed in the unorganized sector that is near to 92 % of total workforce. This is the largest
population of unsecured workers on earth only after China, where the clear figure is still unknown.
Majority of the people are employed in agriculture, small shops, construction, and manufacturing
sectors. These workers work without any authentic Social Security Measures, that the workers in the
organized sector get. However Social Securities Act for unorganized sector was enacted by The
Parliament in 2008, which provides for social security to unorganized workers through various central
government schemes. The employability and wages of these workers is subject to demand and
supply forces in the labour market. These workers are largely unskilled / semi-skilled. With meager
income levels they can hardly afford nutrition, education and healthcare, which form the basis of
economic development of a nation. With stringent labor laws hiring and firing becomes difficult thus
providing an economic reason to employers to opt for contract workers. To cope with temporary
surge in demand of unskilled and semiskilled manpower, companies in Government and Private
sector employ contract labor.
Process of globalization, liberalization has resulted in the increase in the trend towards substitution
of regular employment by contract employment and this trend is going to continue and grow in
future. One of the major factors responsible for preferring contract labour against the regular
employees is the temptation to lower overall wage cost for similar quality and quantity of work.
In the era of globalization flexibility is required in relation to capital, labour or bureaucracy. Flexibility
is required in order to adapt to the fast changing world and complete effectively. It is argued strict
labour regulations are harmful or disadvantageous not only to domestic producers but also to foreign
direct investments and eventually effect investment, output and employment. Over the years many
countries have liberalized their labour laws in order to make it more investment and employment
friendly. However this process has weakened the job security and collective bargaining. In India too,
there has been increase in the casual or contract labour.
Contract worker is an employee who is employed by the “Principal Employer”, indirectly through a
“contractor”. The contract of employment is between the employee and the contractor. The
employee actually works for the “Principal Employer”. For Full time employees there is only one
contract – between the employer, and the candidate. For contract labor employment there are two
contracts:
a. Contract of employment between contract worker and contractor.
b. Obligation to work between contract worker and Principal employer
A workman is deemed to be employed as Contract Labour when he is hired in connection with the
work of an establishment by or through a Contractor. Contract workmen are indirect employees.
Contract Labour differs from Direct Labour in terms of employment relationship with the
establishment and method of wage payment. Contract Labour, by and large is not borne on pay roll
nor is paid directly. The Contract Workmen are hired, supervised and remunerated by the Contractor,
who in turn, is remunerated by the Establishment hiring the services of the Contractor. Contract
labours suffer from inferior labour status, casual nature of employment, lack of job security and poor
economic conditions. It was also observed that in some cases the contract labourers did the same
work as the workers directly employed by the industrialist but were not paid the same wages and the
same working conditions. This practice of contract labour has also lead to the exploitation of these
laborers as they are not employed directly under the employer.
The Contract Labour Act was passed to prevent exploitation of contract labour and also to introduce
better conditions of work. The Act provides for regulation and abolition of contract labour. The
underlined policy of the Act is to abolish contract labour wherever possible and practicable and
where it can be abolished altogether, the working conditions of the contract labour should be so
regulated as to ensure payment of wages and provisions of essential amenities. The Act provides for
regulated conditions of work and contemplates progressive abolition to the extent contemplated
under the Act. It extends to the whole of India and applies to:
1) Every establishment in which twenty or more persons are employed or were employed on any day
of the preceding twelve months as contract labour .
2) To every contractor who employs or who employed on any day of the preceding twelve months
twenty or more workmen.
The appropriate government can extend the provisions of the Act to any establishments or
contractor employing less than the number specified above, by notification. It shall not apply to
establishments in which work is of intermittent or casual nature. The act does not apply:
(a) To establishments in which work only of an intermittent or casual nature is performed.
(b) If a question arises whether work performed in an establishment is of an intermittent or casual

nature, the appropriate Government shall decide that question after consultation with the Central
Board or, as the case may be, a State Board, and its decision shall be final.
History of the act-/objective

Contract Labour (Regulation & Abolition) Act 1970
The system of employment of contract labour has been prevailing since many years. The Royal
commission on labour which was constituted to inquire into the stage of Indian labourers had
recommended the abolition of “Jobber System” way back in 1931 due to the exploitation of
labour by the Jobbers or the contractors. The question of abolition of contract labour has been
under the consideration of the Government for a long time. During the second five year plan the
planning commission made certain recommendations, namely, undertaking of studies to ascertain
the extent of the problem of contract labour. Progressive abolition of the system and improvement
of services, conditions of contract labour where abolition was not possible. The matter was then
discussed at various meeting of tripartite committees at which the state government was also
represented and the general consensus of opinion was that the system should be abolished
wherever possible or practicable and that in case where this system could not be abolished all
together, the working conditions of contract labour should be regulated so as to ensure payment
& wages and provision of essential amenities. It aimed at abolition of contract labour in respect of
such categories as may be notified by appropriate government in the light of certain criteria that
have been laid down, and at regulating the service conditions of contract labour where abolition is
not possible. The supreme court has held that the objective of the Act is to regulate & improve the
conditions of services of contract labour and not merely to abolish contract labour. It is an
important piece of social legislation & seeks to regulate the employment of contract labour and
wherever necessary to abolish the same
In India, contract laborers are protected by the contract labour regulation and abolition act 1970.
According to the act the contract labourer is defines as- one who is hired in connection with the work
of an establishment by a principal employer through a contractor.

According To National Sample Survey Organization

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According to National Sample Survey Organization (NSSO), approx 400 million people in India are

a. Contract of employment between contract worker and contractor.

b. Obligation to work between contract worker and Principal employer

(a) To establishments in which work only of an intermittent or casual nature is performed.

(b) If a question arises whether work performed in an establishment is of an intermittent or casual

History of the act-/objective

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